Graham v. DaimlerChrysler Corp., No. S112862.

• Court: United States State Supreme Court (California)
• Citation: 34 Cal.4th 553,101 P.3d 140,21 Cal.Rptr.3d 331
• Decision Date: 02 December 2004
• Docket Number: No. S112862.
• Parties: Robert GRAHAM et al., Plaintiffs and Respondents, v. DAIMLERCHRYSLER CORPORATION, Defendants and Appellants.

21 Cal.Rptr.3d 331
34 Cal.4th 553
101 P.3d 140

Robert GRAHAM et al., Plaintiffs and Respondents,
v.
DAIMLERCHRYSLER CORPORATION, Defendants and Appellants

No. S112862.

Supreme Court of California.

December 2, 2004.

As Modified January 12, 2005.

21 Cal.Rptr.3d 333

Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., DoHoang T. Duong, Los Angeles, Gregory D. Brown, Oakland, Dominic Lanza, Los Angeles; Bryan Cave, Sheldon Eisenberg, Santa Monica, Charles A. Newman, John W. Rogers, Walnut Creek; Robert E. Norton II and Mary E. Waldrup for Defendants and Appellants

Somach, Simmons & Dunn, Timothy M. Taylor, Nicholas A. Jacobs, Christian C. Scheuring, Sacramento, for Western Placer Waste Management Authority as Amicus Curiae on behalf of Defendants and Appellants.

Ruth Sorensen, Alturas, and Jennifer B. Henning for California State Association of Counties as Amicus Curiae on behalf of Defendants and Appellants.

Fred J. Hiestand, Sacramento, for Civil Justice Association of California as Amicus Curiae on behalf of Defendants and Appellants.

Daniel J. Popeo, Paul D. Kamenar; Latham & Watkins, Jennifer F. Ziegaus and Daniel P. Brunton, San Diego, for Washington Legal Foundation as Amicus Curiae on behalf of Defendants and Appellants.

Law Offices of Richard M. Pearl, Richard M. Pearl, Berkeley; Kemnitzer, Anderson, Barron & Ogilvie, Andrew J. Ogilvie, Mark F. Anderson and Bryan A.

21 Cal.Rptr.3d 335

Kemnitzer, San Francisco, for Plaintiffs and Respondents

Bill Lockyer, Attorney General, Manuel M. Medeiros, State Solicitor General, Richard M. Frank, Chief Assistant Attorney General, Theodora Berger, Assistant Attorney General, and Edward G. Weil, Deputy Attorney General, as Amici Curiae on behalf of Plaintiffs and Respondents.

F. Paul Bland, Kerry-Ann T. Powell, Victoria W. Ni, Oakland, and Arthur H. Bryant for Trial Lawyers for Public Justice, AARP, ACLU of Northern California, ACLU of San Diego and Imperial Counties, ACLU of Southern California, Asian Law Caucus, Asian Pacific American Legal Center of Southern California, Bet Tzedek-The House of Justice, California League for Environmental Enforcement Now, California Women's Law Center, Disability Rights Advocates, Disability Rights Education and Defense Fund, Inc., The First Amendment Project, The Impact Fund, Law Offices of Joaquin G. Avila, Lawyers' Committee for Civil Rights of the San Francisco Bay Area, Legal Aid Foundation of Los Angeles, Mexican American Legal Defense and Educational Fund, National Association of Consumer Advocates, National Center for Youth Law, Prison Law Office, Protection and Advocacy, Inc., Public Advocates, Inc., Public Citizen, Public Counsel, Public Interest Law Project, Rosen, Bien & Asaro, Western Center on Law and Poverty, Western Law Center for Disability Rights and Youth Law Center as Amici Curiae on behalf of Plaintiffs and Respondents.

Esner & Chang, Stuart B. Esner; Rohde & Victoroff and Stephen F. Rohde, Los Angeles, for Los Angeles County Bar Association and Beverly Hills Bar Association as Amici Curiae on behalf of Plaintiffs and Respondents.

Chavez & Gertler, Mark A. Chavez and Kim E. Card, Mill Valley, for The Bar Association of San Francisco as Amicus Curiae on behalf of Plaintiffs and Respondents.

The Sturdevant Law Firm, James C. Sturdevant, San Francisco; Ian Herzog, Santa Monica; Michael Adler; Sharon J. Arkin, Newport Beach; Stuart B. Enser; Brian S. Kabateck, David A. Rosen, Los Angeles; Daniel U. Smith, Kentfield,; Christine D. Spagnoli; Lea-Annn Tratten; Steven B. Stevens, Los Angeles; and Scott H.Z. Sumner, Walnut Creek, for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiffs and Respondents.

Mark Savage, San Francisco, for Consumers Union of U.S., Inc., as Amicus Curiae on behalf of Plaintiffs and Respondents.

Fazio & Micheletti, Jeffrey L. Fazio and Dina E. Micheletti, San Mateo, for Friends of the Earth, Inc., as Amicus Curiae on behalf of Plaintiffs and Respondents.

Claudia Center, Elizabeth Kristen; and Linda Kilb for The Legal Aid Society-Employment Law Center and Disability Rights Education and Defense Fund as Amici Curiae on behalf of Plaintiffs and Respondents.

21 Cal.Rptr.3d 334

MORENO, J

In this case defendant offered to repurchase a truck that had been marketed with false statements about its towing capacity. This offer came after a lawsuit plaintiffs filed against defendant seeking this repurchase remedy, but before any kind of court judgment was rendered. Plaintiffs were awarded substantial attorney fees under Code of Civil Procedure section 1021.5.¹ Defendant raises several issues regarding those fees. The first is

21 Cal.Rptr.3d 336

whether we should reconsider the catalyst theory, recognized by this court in Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348, 188 Cal.Rptr. 873, 657 P.2d 365 (Westside Community). Under the catalyst theory, attorney fees may be awarded even when litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and in the manner sought by, the litigation. We conclude the catalyst theory should not be abolished but clarified. In order to be eligible for attorney fees under section 1021.5, a plaintiff must not only be a catalyst to defendant's changed behavior, but the lawsuit must have some merit, as discussed below, and the plaintiff must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation. Because these limitations on the catalyst theory are to some degree new and were not addressed by the parties or the trial court, we remand for reconsideration of the trial court's award of attorney fees in this case.

Defendant also contends the trial court erred in concluding that the present lawsuit substantially benefited a large group of people or the general public, as required by section 1021.5. We conclude the trial court did not abuse its discretion in making that conclusion. Finally, defendant, while conceding that a plaintiff could be awarded attorney fees for attorney fee litigation, contends that these fees should not be enhanced beyond the "lodestar" amount. We do not endorse such a categorical rule, but we explain below that fees for fee litigation usually should be enhanced at a significantly lower rate than fees for the underlying litigation, if they are enhanced at all. We therefore will remand the cause to the trial court to recalculate the amount of the fee in light of the principles discussed below, assuming it finds on remand that plaintiffs are eligible for some attorney fees.

I. STATEMENT OF FACTS

The facts, taken largely from the Court of Appeal's opinion, are as follows:

DaimlerChrysler incorrectly marketed its 1998 and 1999 Dakota R/T trucks as having a 6,400-pound towing capacity when they could actually tow only 2,000 pounds. The error occurred because the Dakota R/T was a sporty version of an existing truck model, which could tow 6,400 pounds. However, to obtain a sporty design, DaimlerChrysler lowered the suspension on the Dakota R/T, thus reducing its towing capacity.

The reduced towing capacity was a potential risk factor. The lowered suspension meant that towing more than 2,000 pounds would cause the suspension to bottom out, stressing the frame and increasing fatigue and wear. The DaimlerChrysler response team considered this a potential safety issue.

Buyers who wanted to tow more than 2,000 pounds were told they could do so only if their Dakota R/T was modified with a trailer hitch costing $300. The factory installed some of these hitches, while other buyers who wanted to tow had dealer-installed or after-market hitches attached.

Nationwide, DaimlerChrysler sold or leased fewer than 7,000 of the Dakota R/T's in the two relevant years. Fewer than 1,000 affected R/T's were sold in California during the two years.

By February 1999, DaimlerChrysler set up a response team to address the problem. By June 1999, DaimlerChrysler had taken steps to replace the incorrect marketing materials, owners manuals, and engine and door labels for not-yet-sold Dakota R/T's, although public agency investigation revealed that brochures misrepresenting the trucks' towing capacity were

21 Cal.Rptr.3d 337

still being distributed as of August 1999. DaimlerChrysler also had notified existing buyers of the error, told them not to attempt to tow more than 2,000 pounds, and provided them with the same modified materials. Simultaneously, DaimlerChrysler began to address remedial measures for customers who had bought or leased their Dakota R/T's under the incorrect marketing program.

Many Dakota R/T buyers never intended to tow more than 2,000 pounds. When informed by DaimlerChrysler of the error, most of those customers were satisfied with DaimlerChrysler's offers of cash and merchandise.

Initially, DaimlerChrysler offered $300 refunds to buyers who had purchased hitches of that amount. By the summer, DaimlerChrysler authorized dealers to repurchase or replace Dakota R/Ts on a case-by-case basis, but only for customers who demanded such a remedy.

On July 29, 1999, the Santa Cruz County District Attorney contacted DaimlerChrysler about the problem, threatened legal action, and requested DaimlerChrysler's input before acting. On August 10, 1999, the California Attorney General notified DaimlerChrysler it had joined the Santa Cruz County District Attorney. The public agencies requested a response by the end of August 1999.

Plaintiffs filed their case on August 23, 1999, in Los Angeles County Superior Court. Plaintiffs alleged they all bought 1999 Dakota R/T's from various DaimlerChrysler dealers. Only Graham lived and bought his truck in California. Plaintiffs alleged DaimlerChrysler marketed, sold, and warranted their 1998 and 1999 Dakota R/T's as capable of towing 6,400 pounds when the trucks actually could tow only 2,000 pounds. Plaintiffs alleged DaimlerChrysler acknowledged the error by...